ISS backs Korea Zinc board nominees ahead of key vote

Global proxy adviser Institutional Shareholder Services threw its support behind the proposal by Korea Zinc's incumbent board to nominate five directors ahead of a general shareholders' meeting, as the company's standoff with major shareholder Young Poong and MBK Partners continues to escalate.

The ISS recommendation arrives roughly two weeks ahead of the March 24 annual shareholders' meeting, at which investors in the world's largest zinc smelter will vote on competing board nominations put forward by Chair Choi Yun-beom and a coalition of major shareholder Young Poong and private equity firm MBK Partners.

In a report titled “ISS Proxy Analysis & Benchmark Policy Voting Recommendations” released Monday, ISS suggested shareholders support the appointment of five directors as proposed by the company's board.

It said the structure takes into account the revised Commercial Act that is scheduled to take effect in September, which requires the election of two separately elected audit committee members. ISS added that by conducting the election of audit committee members as an independent agenda item, minority shareholders will be able to closely examine the qualifications and expertise of audit committee members.

For other agenda items at the shareholder meeting, ISS broadly sided with Korea Zinc, including converting 917.6 billion won ($621.34 million) in legal reserves into retained earnings, adopting provisions to strengthen minority shareholder protection, introducing electronic shareholder meetings and amending the articles of incorporation to allow quarterly dividends and reinforce directors’ fiduciary duties.

ISS also advised shareholders to reject a stock split proposal submitted by MBK Partners and Young Poong.

The upcoming annual meeting is expected to be a decisive moment in the long-running battle between the two parties.

The Young Poong-MBK alliance controls roughly 46 percent of Korea Zinc’s shares and has been contesting Choi’s authority since launching a tender offer in September 2024.

At last year’s shareholder meeting, Choi’s camp was widely seen as having gained the upper hand against the Young Poong-MBK faction. But the vote failed to produce a clear resolution to the control dispute, leaving tensions between the parties largely unresolved over the past year.

The main focus of this year’s meeting is the composition of Korea Zinc’s board.

The board currently has 19 seats, though only 15 directors are effectively serving after four members were suspended from their duties. Of those, 11 are aligned with Choi while four are linked to the Young Poong-MBK alliance.

Among them, the terms of six directors -- including Choi himself and Young Poong adviser Chang Hyung-jin -- will expire at the upcoming meeting.

Chang, the son of the late Young Poong co-founder Chang Byung-hee, is set to retire from Korea Zinc's board after serving as a registered director since 1992.

His exit after 32 years on the board carries considerable symbolic weight. For decades, Korea Zinc and Young Poong operated under a shared governance framework, where the Chang family ran Young Poong and its electronics subsidiaries, while the Choi family oversaw Korea Zinc. Having served as a key link between the two families since the early 1990s, Chang’s departure comes as that decadeslong arrangement has effectively unraveled amid the ongoing control battle.

The two sides have proposed different strategies for filling the board vacancies.

Choi’s side has suggested filling only five of the six seats, leaving room for the future appointment of additional directors who would serve on the audit committee under the new legal framework.

In contrast, the Young Poong-MBK faction proposed filling all six seats, a move aimed at capturing at least two or three seats and shifting the balance of influence on the board.

For board appointments, ISS advised voting in favor of nominees Hwang Duk-nam, the board’s chair, and Walter Field McLallen, backed by Crucible JV, a joint venture between Korea Zinc and the US government tied to its planned US smelter. It also endorsed Park Byung-wook, Choi Byung-il and Lee Sun-sook, who were nominated by the Young Poong-MBK side, and recommended approval of Lee Min-ho as a separately elected audit committee member.

However, ISS recommended voting against the reappointment of Korea Zinc Chair Choi as an internal director.

ISS clarified that recommending a particular combination of candidates should not be interpreted as a reflection on the suitability of other nominees, but rather that the recommended group would most likely produce the most effective governance outcome.

The outcome of the vote is expected to reshape the company's governance structure and future direction, observers say. Amid the intensifying battle, both camps are actively seeking support from institutional investors, while proxy advisers are expected to issue voting recommendations in the coming days.